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Rockwell Expecting Disappointing Earnings

Rockwell International Corp. on Wednesday said it will report earnings that are far below analysts' forecasts because of slowing sales and falling prices for semiconductors that go into computer modems.

The Costa Mesa-based company said it expects to earn about 53 cents a share in the quarter ending this month. Analysts expected the company to earn 75 cents a share, according to the average of six analysts surveyed by IBES International Inc.

The earnings disappointment is a blow to Rockwell, a company that sold off much of its aerospace and defense businesses to focus on making modem chipsets and other electronic products. Now, price wars in the market for personal computers and the components that go into them are hurting the company.

"All the PC suppliers are having trouble," said Bruce Raabe, an analyst at Collins & Co. in Larkspur, who rates Rockwell "neutral." "Modems are a commodity product."

Rockwell issued its statement after U.S. markets closed. Shares rose $1.13 to close at $60.50 in New York Stock Exchange trading.

In addition to price cuts, Rockwell has had trouble boosting sales because of a dispute over a standard in the modem industry. Many customers had delayed purchases because the industry didn't establish a standard for new 56K modems until February. Without the standard, different modems couldn't work with one another at high speeds.

Rockwell said it expects to earn about $2.89 a share in fiscal 1998, the same as what it earned in 1997. Rockwell also said it will take a $10-million restructuring charge in its Semiconductor Systems division, which makes the modem chipsets.

Worldwide shipments of the chipsets that go into modems rose to 68 million in 1997 from 59 million in 1996, a 16% growth rate, according to VisionQuest of Moorpark, which tracks shipments. That's down from a 44% growth rate in 1996.

"Sales growth of modem chipsets is slowing, said Ernie Raper, an analyst at VisionQuest. "But price erosion hurt them the most." Prices for 56K chipsets from Rockwell and others fell from about $170 to as little as $99 last year, Raper said.

Rockwell sold its aerospace and defense businesses to Boeing Co. in December 1996 for $3.2 billion.